Microsoft's software is due for major changes in order to transition effectively into the era of cloud computing and mobility, the company's co-founder Bill Gates says in a Rolling Stone interview.

“Office and the other Microsoft assets that we built in the Nineties and kept tuning up have lasted a long time,” he says. “Now, they need more than a tune-up. But that's pretty exciting for the people inside who say, ‘We need to take a little risk and do some new stuff.’”

He says Facebook’s founder Mark Zuckerberg took such a risk in buying WhatsApp for $19 billion and that he thinks it was a sound move. “I think his aggressiveness is wise – although the price is higher than I would have expected,” Gates says.

Microsoft was interested in WhatsApp, he says, not just for its technology but for its user list. “It's software; it can morph into a broad set of things – once you're set up communicating with somebody, you're not just going to do text. You're going to do photos, you're going to share documents, you're going to play games together,” he says. “Microsoft would have been willing to buy it, too. . . . I don't know for $19 billion, but the company's extremely valuable.”

He says Microsoft rival Google is in a similar situation where it has enough cash to pursue many varied technologies at once. “And when you have a lot of money, it allows you to go down a lot of dead ends. We had that luxury at Microsoft in the Nineties,” he says. “You can pursue things that are way out there. We did massive interactive TV stuff, we did digital-wallet stuff. A lot of it was ahead of its time, but we could afford it.”

He says that despite other factors, innovation is healthy in high tech. “Innovation in California is at its absolute peak right now,” Gates says. “Sure, half of the companies are silly, and you know two-thirds of them are going to go bankrupt, but the dozen or so ideas that emerge out of that are going to be really important.”

GATES TAKES ON SURVEILLANCE

Gates says that in light of revelations about NSA surveillance of U.S. phone records brought to light by Edward Snowden, use of surveillance should be better regulated. “There's always been a lot of information about your activities. Every phone number you dial, every credit-card charge you make. It's long since passed that a typical person doesn't leave footprints. But we need explicit rules,” he says. “I actually wish we were having more intense debates about these things.”

As for Snowden himself, Gates thinks that if he wanted to spark discussions about privacy, the former NSA contractor went about it the wrong way. “If he wanted to raise the issues and stay in the country and engage in civil disobedience or something of that kind, or if he had been careful in terms of what he had released, then it would fit more of the model of ‘OK, I'm really trying to improve things,’” he says. “You won't find much admiration from me.”

He says defining when surveillance is appropriate needs to be better defined. “Should surveillance be usable for petty crimes like jaywalking or minor drug possession? Or is there a higher threshold for certain information? Those aren't easy questions,” he says.

“Should the rules be different for U.S. citizens versus non-U.S. citizens? There is the question of terrorist interdiction versus law-enforcement situations. If you think the state is overzealous in any of its activities, even if you agree with its sort of anti-large-scale-terrorism efforts, you might say, ‘Well, I think the abuse will outweigh the benefits. I'll just take the risk.’ But the people who say that sometimes having this information is valuable – they're not being very articulate right now.”

Tim Greene covers Microsoft and unified communications for Network World and writes the Mostly Microsoft blog. Reach him at tgreene@nww.com and follow him on Twitter @Tim_Greene.

Join the Network World communities on Facebook and LinkedIn to comment on topics that are top of mind.